Telecom Italia predicts earnings recovery

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Telecom Italia has predicted a recovery in earnings this year as the Italian mobile market reaches a cyclical low point after another steep fall in profits for the first quarter.

A damaging price war in the mobile market in Italy continued to weigh on results at Italy’s largest telecoms group, although this was partly offset by steady performance in its Brazilian business.

In Italy, the group said that the average revenue per customer continued to fall in its traditional telecoms services as a result of a strategy towards bundling combined fixed and mobile tariffs. While this has an impact on near-term profitability, Telecom Italia said that it would protect market share to help stabilise revenue in the medium to long term.

The Brazilian business continued to grow although mobile operations were slower compared with the same period in 2013 owing to greater competitive pressure and the slower economic growth of the country.

Shares in Telecom Italia, which dropped by about 5 per cent on Tuesday following results that missed some analyst forecasts, have risen by more than a third during the year in part owing to the speculation that the Brazilian business could be sold.

“We have accelerated our investments in new technology, strengthening our leadership in fixed and mobile ultra-broadband coverage,” said Marco Patuano, chief executive. “As a whole we are in line with our plans and targets, which see a progressive acceleration in year-on-year recovery.”

Revenue at the group fell almost 12 per cent to €5.2bn compared with the same period last year, while earnings before interest, tax, depreciation and amortisation dropped 8.4 per cent to €2.2bn.

Adjusted net debt was €27.5bn, a fall of €1.2bn compared with the previous year. Mobile revenue declined 14.4 per cent in the first quarter of 2014, a deterioration from 12.9 per cent last quarter, while fixed telecoms revenue declined 6.9 per cent.

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